These inroads include miles of wide highways packed with cars, and bustling megacities teeming with millions of people with disposable income and a desire to spend.

These cash-laden consumers have attracted the attention of companies all over the world, including several in central Ohio.

“China is now a huge market,” Scherer said. “The middle class continues to get larger and have more purchasing power, and companies have more of an opportunity to sell their goods and tap into the vast consumer base.”

Opportunities there have prompted several local companies to make inroads in China.

Dublin-based Cardinal Health became the first major U.S. drug wholesaler to enter the Chinese market, through the $470 million purchase of local distributor Yong Yu in November.

NetJets recently joined forces with a consortium of Chinese investors and soon will offer management services for customers.

Abercrombie & Fitch has opened three of its Hollister stores in China.

“China remains a big priority for us this year, with another two or three Hollister (store) openings anticipated,” A&F CEO Mike Jeffries said recently. “In addition, we expect our Hong Kong Abercrombie & Fitch flagship opening in August to play a key role in raising awareness of our brands in mainland China.”

This is the goal of hundreds of Ohio companies.

Some will succeed, while others will fail, said Oded Shenkar, a professor at Ohio State University’s Fisher College of Business and author of The Chinese Century and Copycats: How Smart Companies Use Imitation To Gain A Strategic Edge.

“People are salivating at the prospect of selling to so many consumers,” he said. “But it’s also very different — consumer taste and preferences, and there’s a different regulatory environment, with the government more involved.”

Many companies, Shenkar said, have learned their lessons the hard way. An example is Wal-Mart Stores.

“As amazing as it sounds, they made basic geography mistakes at first,” he said. “At a store in northeast China, where it is cold much of the year, they stocked summer clothes.”

Despite its early problems, Wal-Mart has done well in China, and so have KFC and Starbucks, Peterson said, while Best Buy and Home Depot have not.

“Starbucks has been an amazing story,” he said. “China was a nation that only drank tea, and now they’re drinking coffee.”Best Buy and Home Depot struggled, Peterson said, “because retail here is so much more sophisticated, and if you rubber-stamp it in China, you won’t do so well ... the Chinese prefer more of an Indiana Jones-style bazaar shopping.” In 2011, Best Buy closed all its stores in China to concentrate on its Five Star stores, a Chinese chain of electronic stores it bought.“Best Buy had this perfectly layered and organized camera section, grouped by brand and price, and they got no action,” Peterson said of the Chinese stores. “At Five Star, they tossed all the cameras in a bin, put one price tag on them, and that did really well.”Cardinal Health hopes to avoid missteps through the acquisition of Yong Yu, an established drug-distribution company.

Eric Zwisler, now president of Cardinal Health China, came to the company via Yong Yu, where he was president. He understands Chinese culture and business.

Wages have risen, he said, creating a growing middle class.

The higher wages have also led to a shift in manufacturing, Zwisler said, from the massive, coastal cities to more rural and inland areas of China, as well as out of the country to Vietnam, Indonesia, Bangladesh and other countries where labor costs are lower.

“Another trend we’re seeing is the rise of service industries” in China, Zwisler said, referring to the growth of legal, financial, insurance and professional-service companies. This is seen as a sign of the maturation of the Chinese economy.

The Chinese pharmaceutical industry is fairly advanced, but distribution is split among dozens of regional companies. In the United States, Cardinal is one of the three major companies that distribute nationally and dominate the field.

In the past, Zwisler said, “the (Chinese) drug manufacturers and government got together and planned who produced what and where it went.”

This cozy system began to break down in the late 1980s as actual competition began.

Yong Yu is about the 10th largest distributer in China, said Jeff Henderson, Cardinal’s chief financial officer.

“We intend to expand our geographic footprint to a greater number of cities and acquire some more smaller distributors,” he said. “And the next step is to layer additional business on top of this geographic distribution, such as medical devices and consumer health-care products — the things we do in the United States.”

Cardinal also plans to open a retail pharmacy in Shanghai.

“In some ways, our industry is more consumer-driven in China,” Henderson said. “About 50 percent of what people spend on health care is cash out of pocket, and this means consumers have a significant economic interest” in their medical treatment.

Several factors made the time right for NetJets to expand into China.

“There was increasing wealth in the country, which means people are willing to participate in private aviation,” said NetJets CEO Jordan Hansell.

Another factor, he said, was the government’s desire to beef up its aviation industry and increase the number of airports.

China is a large country, and getting from city to city as quickly as possible is becoming more important.

“Travel has become more congested, and there’s a greater need to be in a place quicker,” Scherer said. “My initial thought is this could be a great market” for NetJets.

China has only about 170 airports, Hansell said; that’s a fraction of the number in the United States and Europe.

“With the government behind it, that means the airports will be built,” Hansell said.

Because of Chinese regulations, the majority of an aviation operation such as NetJets must be locally owned. That meant the company needed to find Chinese partners.

NetJets is working with a group of Chinese investors led by Hony Jinsi Investment Management (Beijing) Ltd. and Fung Investments.

The venture, NetJets China Business Aviation Ltd., will be based in Zhuhai, and Hansell said he hopes that flying begins in China in May 2013.

“The key is to pick the right partners, spend time understanding the market and give it a good deal of your attention,” he said.

Shenkar warns that partnerships can have drawbacks.

“You could argue that once their Chinese partner learns how to operate that kind of business, they could buy (NetJets) out or force them out,” he said. “But these were the conditions to get into the market, and NetJets wouldn’t have accepted this in other parts of the world. And if it wasn’t them, I’m sure a competitor would have done the same.”

Local companies looking to begin Chinese operations can get help from Columbus2020 and the Ohio Department of Development.

“There’s a big emphasis in China on increasing their domestic consumption,” he said. “And that means opportunities for Ohio businesses to increase their exports and add jobs.”

U.S. companies exported $103.9 billion worth of goods to China in 2011, according to the U.S. Department of Commerce. Only Canada, at $280.8 billion, and Mexico, at $197.5 billion, imported more from the United States.

Ohio companies exported $2.7 billion worth of goods to China in 2011, an 838 percent increase from 2000. The top exports are machinery, computers and electronics, transportation equipment and chemicals.

Aubihl said 7.1 percent of the state’s private sector jobs are a direct result of exports.

“Ninety-five percent of the world’s population is outside the United States,” Scherer said, “and if you’re not selling to these people, you’re missing a lot of potential customers.”

swartenberg@dispatch.com

@stevewartenberg

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